FTSE CLOSE: Sterling claws back some of the recent falls while the Footsie pauses for breath

CLOSE: The pound has continued its remarkable rally after Theresa May's victory in the race to become the next prime minister helped calm investor fears over political uncertainty.

Sterling jumped as high as 1.32 US dollars, helping claw back some of the recent dramatic falls seen since the Brexit vote - which saw the pound hit 31-year lows against the greenback.

The pound was also 1.8 per cent higher against the euro at 1.19 euro.

The wider FTSE 100 Index paused for breath, edging down 2.2 points at 6680.7, having surged by nearly 100 points on Monday when it was confirmed Mrs May would be in post as prime minister by Wednesday after rival candidate Andrea Leadsom dropped out of the race.

Foreign exchange traders said the worst may be over for the pound, but warned over further turbulence.

Hussein Sayed, chief market strategist at FXTM, cautioned: "The relief rally led by political clarity is likely to be short-lived as many questions remain unanswered, and the immediate risk will be the Bank of England's meeting on Thursday, which is likely to announce new stimulus measures in response to Britain's shock vote to leave the EU."

Markets worldwide were also on the front foot, with indices across Europe making strong gains. The Dax in Germany lifted 1.3 per cent and France's Cac 40 was 1.6 per cent higher.

The price of oil was up 3.1 per cent at 47.70 US dollars a barrel as the dollar weakened amid concerns over the growing risks to global markets.

The rise came as global oil cartel Opec cut its forecast for world growth this year and said demand for crude from Europe would slow in the wake of the Brexit vote.

The Organisation of the Petroleum Exporting Countries, which controls more than a third of the world's oil supply, warned over the impact of "economic uncertainty" following the referendum decision.

London's top flight index has technically entered a bull market after closing more than 20 per cent higher than its low of 5537 on February 11.

The FTSE 100 has been boosted by the prospect of interest rate cuts and more economy-boosting measures by the Bank of England when it announces its latest monetary policy move on Thursday.

Its rally has been fuelled further thanks to Monday's flurry of political announcements, which helped to demystify some of the uncertainty dogging the financial markets since Britain voted to leave the EU.

Tony Cross, market analyst at Trustnet Direct, said: "The City is no fan of uncertainty so the fact that we now have a new prime minister should at least start to pave the way for the next chapter when it comes to Brexit."

There were also further gains for the FTSE 250 Index - deemed a better barometer for the health of the UK economy - which rose another 0.6 per cent.

British Airways owner IAG was the biggest riser on the top tier after Qatar Airways said it would consider increasing its stake in the company beyond 15.67 per cent.

Shares in IAG were up 5 per cent or 19.7p to 409.9p.

Housebuilders continued their bounce back, with blue chips Taylor Wimpey and Barratt Developments leading the top tier higher, climbing 4.5p to 145.3p and 11.3p to 413.3p respectively.

Financial stocks and retailers, which had also been hit hard after the Brexit vote, were likewise recovering further.

Marks & Spencer shares lifted 4.9p to 334.3p, while Barclays stepped up 3.2p to 148.6p and Lloyds Banking Group rose 1.4p to 56.3p.

But mining groups and more defensive stocks were in the red, such as silver miner Fresnillo, with shares off 55p to 1929p , and drugs giants AstraZeneca slipping 80p to 4476p.

The biggest risers on the FTSE 100 Index were International Consolidated Airlines (IAG) up 19.7p to 409.9p, Glencore up 8.2p to 186p, St James's Place up 36p to 825.5p, easyJet up 47p to 1142p.

The biggest fallers were Mediclinic International, down 56p to 1060p, Randgold Resources, down 410p to 9115p, HIKMA Pharmaceuticals, down 95p to 2505p, and Fresnillo, down 55p to 1929p.

15.40: The Footsie’s gains proved short-lived and US stocks fell back from earlier record highs as oil prices reversed some of today’s strong bounce after global cartel Opec cut its forecast for world growth this year and said demand for crude from Europe would slow in the wake of the Brexit vote.

With less than an hour of trading to go in London, the FTSE 100 Index was down 8.8 points, or 0.1 per cent at 6,974.1, just above the session low of 6,663.66 having surrendered the session peak of 6,703.09.

On Wall Street, after jumping over 130 points to an intraday trading record at 18,353 in early deals, the Dow Jones Industrial Average easing back to an 80.0 point gain at 18,306.9.

The slip back came as oil prices saw an earlier 3 per cent jump pared back by a third after Opec, which controls more than a third of the world's oil supply, warned over the impact of 'economic uncertainty' following Britain's EU referendum decision.

Crude retreat: Oil prices reversed some of today’s strong bounce after global cartel Opec cut its forecast for world growth this year and said demand for crude from Europe would slow in the wake of the Brexit vote

However, Brent crude was still over 2 per cent at higher at $47.28 a barrel as the cartel said the over supply glut that has sent crude prices tumbling would begin to ease in 2017.

In its monthly oil market report, Opec trimmed its forecast for world growth in 2016 to 3 per cent from 3.1 per cent and said the global economy would also be ‘impacted by the dampening effect of the UK vote’.

It is forecasting growth of 1.5 per cent in the UK this year, against its 2.1 per cent prediction made a month earlier, while it believes UK growth will slow sharply to 0.4 per cent in 2017.

Opec held its overall forecast of oil demand growth in 2017 ‘broadly unchanged - forecasting new demand of 1.2 million barrels a day, which is the same as 2016.

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14.45: The Footsie held firm in late afternoon trading as US stocks found further record-breaking gains in early deals, although the advance in London was more subdued as a stronger pound dragged on dollar earners, and with this week’s key Bank of England policy meeting eyed.

With around an hour and three quarters of trading to go in London, the FTSE 100 Index was ahead 13.8 points, or 0.2 per cent at 6,996.7, easing below the session peak of 6,703.09 but above a low of 6,663.66.

The UK blue chip index, however, took a slight breather after soaring 1.5 per cent to an 11-month peak yesterday after Theresa May’s anointing as new Tory party leader and prime minister in waiting eased the post-Brexit political worry.

Up: The Footsie pushed higher in late afternoon trading as US stocks found further record-breaking gains in early deals, although the advance in London was more subdued as a stronger pound dragged on dollar earners

On Wall Street, the blue chip Dow Jones Industrial Average jumped to an intraday trading record at 18,353 in early deals, before easing back slightly, although it was still 115.0 points higher at 18,341.9.

The broader S&P 500 index also reached record levels early on, gaining 14.0 points at 2,151.2, and the tech-laden Nasdaq composite added 38.6 points at 5,027.2.

US stocks hit fresh records on optimism that the new UK prime minister will be able to tackle the Brexit issues, while Friday’s robust US jobs report, and better-than-expected second quarter earnings overnight from aluminium giant Alcoa also gave US markets a lift.

‘There could be a few more surprises during the week given the strength of the US economy. The country's economic data proved to be a lot stronger for the last quarter as compared to the previous one.

‘The weakness in the dollar during the second quarter has also certainly impacted corporate earnings and made an impact on the top line earning number. However, what investors should be mindful of is the forecast that the momentum which we have seen for the quarter is beginning to lose its steam.’

Firmer oil prices also provided support as an interruption in Iraqi crude loadings at Basra threatened to tighten supplies, and traders awaited the latest monthly report from cartel Opec. Brent crude jumped 3.2 per cent higher at $47.72 a barrel.

European stocks were strong too, with France’s CAC 40 index and Germany’s Dax 30 index both up over 1.5 per cent as global markets continued to recover.

On currency markets, the pound extended the gains made following the easing of political uncertainty with Theresa May set to take over as Britain’s prime minister tomorrow night, shrugging aside any worries about a possible UK rate cut.

In afternoon trading, sterling was up 1.1 per cent versus the dollar at $1.3134, and gained 0.8 per cent against the euro at €1.1850 with little impact from Bank of England Governor Mark Carney’s as expected testimony to Parliament today.

Mr Carney said again that the central bank may have to react to a weaker economic outlook after Britain's decision to leave the EU, reinforcing the idea that it is ready to provide the economy with more stimulus, possible as early as this week’s Monetary Policy Committee meeting.

12.30: The Footsie was flat again at lunchtime as a stronger pound on the more stable political climate dragged heavyweight dollar earners lower, although hints of Bank of England stimulus measures to calm the trauma of Brexit continued to boost financial and housebuilding stocks.

By mid session, the FTSE 100 Index was up just 2.7 points at 6,685.6 having been stuck in a fairly tight trading range all morning, between a high of 6,698.92 and a low of 6,663.66.

The UK blue chip index took a breather after soaring to an 11-month peak yesterday when Theresa May’s anointing as Tory party leader and prime minister in waiting eased the post-Brexit political worries.

European stocks were much stronger, with France’s CAC 40 index and Germany’s Dax 30 index both up over 0.5 per cent as global markets continued to recover from the post-Brexit vote worries.

Stimulus hints: Bank of England boss, Mark Carney (pictured) simply repeated to UK lawmakers that the central bank may have to react to a weaker economic outlook after Britain's decision to leave the EU

Chris Beauchamp, Senior Market Analyst at IG, said: ‘Equities continue to rally on the continent, but some losses for heavyweight stocks on the FTSE 100 mean that index is only just managing to post small gains so far this morning.

‘It would be too early to suggest that the rally in internationally-focused, dividend paying shares, which have been furiously bought since 24 June, is finally over, but a pause of this kind was only to be expected.

‘With oil and metals looking robust so far today this temporary weakness may be the first real chance dip buyers have had to hop on board the combined momentum/dividend train that has been so important in driving the FTSE 100 to new highs for the year.’

US stocks looked on track for a higher open today, with the S&P 500 poised for a fresh record after better-than-expected second quarter earnings overnight from aluminium giant Alcoa, last week's robust US payrolls report, and amid optimism for the UK new prime minister to tackle Brexit.

Firmer oil prices also provided support as an interruption in Iraqi crude loadings at Basra threatened to tighten supplies, and traders awaited the latest monthly report from cartel Opec. Brent crude jumped 3.0 per cent higher at $47.64 a barrel.

On currency markets, the pound remained stronger following the easing of political uncertainty with Theresa May set to take over as Britain’s prime minister tomorrow night, shrugging aside recent worries about a possible UK rate cut as early as this week.

At lunchtime, sterling was up 1.4 per cent versus the dollar at $1.3179, and gained 1.0 per cent against the euro at €1.1875 with little impact from Bank of England Governor Mark Carney’s as expected testimony to Parliament today.

Mr Carney said again that the central bank may have to react to a weaker economic outlook after Britain's decision to leave the EU, reinforcing the idea that it is ready to provide the economy with more stimulus, possible as early as this week’s Monetary Policy Committee meeting.

In his first hearing with MPs since the Brexit vote, Mr Carney said: ‘The possibility of the economic outlook softening, that there is less demand for credit for various reasons and if the outlook has worsened ... in the judgment of the MPC, there always could be monetary response if that's consistent with its remit.’

The BoE boss also denied allegations that policymakers used scare tactics to sway voters in the run up to the EU referendum vote.

Among equities, heavyweight dollar earners, which had helped steady the FTSE 100 index after sterling dropped to a 31-year low against the US currency in the day’s after the Brexit vote, ran into some profit-taking today as the pound bounced back.

Drugmakers GlaxoSmithKline and AstraZeneca stood out, down 30.5p at 1,632p and 93p at 4,463p respectively, as did drinks giant Diageo, off 35p at 2,126p, and household products firm Reckitt Benckiser, 152p lower at 7,540p.

Precious metal miners Randgold Resources and Fresnillo were the two biggest blue chip fallers, however, losing 250p at 9.275p and 33p at 1.951p as the price of gold fell 0.5 per cent to $1,348.80 an ounce as its safe haven benefits were less in demand.

Mobile telecoms giant Vodafone Group was also a big FTSE 100 faller, shedding 1.6 per cent or 3.7p to 226.3p after Citigroup cut its rating to neutral from buy.

But strength in financial stocks on the steadier political climate and rate cut hopes helped limit the FTSE 100’s falls. Insurer Aviva was the top performer, adding 14.7p at 381.0p, while Lloyds Banking Group gained 3.9p at 57.0, and Barclays rose 5.3p to 150.7p.

Gains by housebuilders also provided underlying support on hopes a UK rate cut will support the UK property market, with Barratt Developments up 1.8 per cent, or 7.1p at 409.1p, while Taylor Wimpey added 2.7p at 143.5p.

An upbeat trading statement from FTSE 250 constructor and housebuilder Galliford Try also gave the sector a lift, with the firm expecting to post full year results in line with management's expectations. Galliford shares jumped 5 per cent, or 48p higher to 930p.

09.45: The Footsie ticked higher as the morning session progressed, as the pound stayed strong, with yesterday’s politically-inspired boost subdued by some caution ahead of Bank of England Governor Mark Carney's testimony to Parliament today given UK rate cut possibilities this week.

Around mid morning, the FTSE 100 Index was up 7.2 points, or 0.1 per cent at 6,690.1 having soared 92.2 points higher yesterday to hit an 11-month peak as Theresa May’s anointing as Tory party leader and prime minister in waiting eased the post-Brexit political worry.

European stocks were much stronger, with France’s CAC 40 index and Germany’s Dax 30 index both up over 1.5 per cent as global markets continued to recover from the post-Brexit vote malaise.

Cooler: The Footsie ticked higher as the morning session progressed, with yesterday’s politically-inspired boost subdued by some caution ahead of Bank of England Governor Mark Carney's testimony to Parliament

US shares hit record highs overnight and Asian stocks rose to a 2-1/2-month peak today thanks to a combination of upbeat US data and expectations of more stimulus from global policymakers.

Oil prices also rose today as an interruption in Iraqi crude loadings at Basra threatened to tighten supplies, but prices held close to two-month lows hit in the previous session as investors continued to slash their bullish bet. Brent crude was up 1.5 per cent to $46.93 a barrel.

On currency markets, the pound continued its rally following the easing of political uncertainty with Theresa May set to take over as Britain’s prime minister tomorrow night, shrugging aside any worries about a likely UK rate cut on Thursday.

Sterling was up 1.1 per cent versus the dollar at $1.3140, and gained 0.7 per cent against the euro at €1.1830 as Brexit-related fears were soothed by political events, though Mr Carney’s words today will still be key for the UK currency.

Ana Thaker, Market Economist at PhillipCapital UK, said: ‘We get the first of the two major comments from the Bank of England this week as Governor Carney faces the Treasury Select Committee to explain the findings of the BoE’s inflation report.

‘The new inflation report will be out in August and there is speculation that the Bank will wait to cut rates (if at all) until then and skip the much anticipated July meeting.’

She added: ‘Sterling is set for a volatile day as markets await Carney’s comments and look for any hints as to the result of Thursday’s MPC meeting and we could see the currency oscillate around the $1.30 level ahead of Thursday.’

Among equities, gains by housebuilders led the FTSE 100 higher as hopes a UK rate cut will support the property market continued to offset initial post-Brexit vote plunges.

An upbeat trading statement from FTSE 250 constructor and housebuilder Galliford Try also gave the sector a lift, with the firm expecting to post full year results in line with management's expectations.

Galliford’s Linden Homes housebuilding arm saw 3,078 completions during the year, compared to 2,769 a year earlier, and its average private sales price rose to £335,000, up from £327,000. Its forward sales position grew 27 per cent at the year-end to £380.0million. Galliford Try shares gained 6.2 per cent, or 54.5p at 936.5p.

Charles Church Homes builder Persimmon was the top FTSE 100 riser, up 4 per cent, or 63p at 1,584p, while Taylor Wimpey added 9.2p at 150p.

Elsewhere with the blue chip gainers, drugmaker Shire jumped 3 per cent, or 147p higher to 4,965p after the US Food & Drug Administration approved its Xiidra treatment for dry eye disease.

Commercial broadcaster ITV also gained 3 per cent, or 5.8p at 191.5p following yesterday’s disposal of UTV to Virgin Media, boosted by an upgrade in rating from UBS to neutral from sell.

But mobile telecoms giant Vodafone Group was a top FTSE 100 faller, dropping 1.9 per cent or 4.4p to 225.6p after Citigroup cut its rating to neutral from buy.

On the second line, a broker downgrade also blighted retailer Sports Direct, with its shares losing 0.8p at 274.6p as Exane BNP Paribas reduced its stance to neutral from outperform.

Oil and gas explorer Premier Oil was a FTSE 250 riser, however, adding 5 per cent or 3.5p at 72.3p, after it said it anticipates production in 2016 will be at the upper end of its previous guidance and operating expenditure in the first half came in below budget.

And Dechra Pharmaceuticals also added 5 per cent, or 862p at 1,254p after the veterinary pharmaceuticals company said trading in the year to the end of June was strong, with robust revenue growth boosted by acquisition contributions.

08.10: After yesterday’s boost from political excitement, the Footsie stated flat this morning with the focus squarely on economic matters as Bank of England governor Mark Carney prepares to give testimony to Parliament days ahead of him possibly signalling a cut in UK interest rates.

In opening deals, the FTSE 100 Index was down 2.1 points, or 0.1 per cent at 6,680.8 having soared 92.2 points higher yesterday to hit an 11-month peak as the political uncertainty lifted in Britain following Theresa May’s anointing as Tory party leader and prime minister in waiting.

Global markets were firmer overnight with US shares hitting record highs overnight and Asian stocks rising to 2-1/2-month peaks thanks to a combination of upbeat US data and expectations of more stimulus from global policymakers.

Global gains: US shares hit record highs overnight and Asian stocks rose to 2-1/2-month peaks thanks to a combination of upbeat US data and expectations of more stimulus from global policymakers

‘The main event this morning, and a potential preview for Thursday’s Bank of England-led trading, will be Mark Carney’s testimony about the latest financial stability report in front of the Treasury Select Committee.’

He added: ‘The pound, which has climbed back above 1.31 and 1.18 against the dollar and the euro respectively, will be keeping a careful eye on the central bank chief for hints on what to expect from the BoE on Thursday.

‘So too the FTSE, which is now hovering around 5 points below 6700; yet unlike sterling the UK index will be looking for confirmation of some kind of rate cut or fresh stimulus, the idea of which has helped drive the FTSE higher at the start of the week.’

No important UK economic data will be released today, although a survey released overnight showed a slowing in British consumer spending in June as bad weather added to uncertainty around the June 23 EU membership referendum.

Oil prices rose today as an interruption in Iraqi crude loadings at Basra threatened to tighten supplies, but prices held close to two-month lows hit in the previous session as investors continued to slash their bullish bet. Brent crude rose 0.6 per cent to $46.54 a barrel.

Stocks to watch in London include:

ASOS – The online fashion retailer said it expects its full year sales to be at the top end of its guidance as it posted 30 per cent growth in third quarter sales to £514.6million, up from £396.7million a year earlier, although its retail gross margin shrank slightly.

GALIIFORD TRY – The FTSE 250-listed construction and housebuilding firm said it expects to post full year results in line with management's expectations, after it sold more houses at higher prices and saw revenue growth in its construction arm.

PAGEGROUP - The recruiter said it saw a slowdown in the run-up to Britain's June 23 referendum on leaving the European Union in its latest quarterly results.

PREMIER OIL – The oil explorer said its full year production levels could exceed previous guidance thanks to strong output from some of its existing and new fields in the North Sea.

SHIRE - The US Food and Drug Administration yesterday approved Shire's lifitegrast eye drops for treating signs and symptoms of dry eye disease, allowing the company to bring to market its most important pipeline medicine.

ITV - Britain's biggest free-to-air commercial broadcaster said yesterday it had agreed to sell UTV Ireland to Virgin Media, a company owned by Liberty Global, for an undisclosed amount.

UK company news scheduled today includes:

AGM: Marks & Spencer, N Brown Group

Trading updates: ASOS, Pagegroup, Galliford Try, Grafton Group, ITE

Finals: Begbies Traynor, Jaywing

Economic news scheduled today includes:

BRC retail sales monitor released overnight

BoE Inflation report hearings at 10am

BoE Quarterly Bulletin at 12pm

German final CPI at 7am

US wholesale inventories at 3pm

US JOLT job openings at 3pm

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FTSE LIVE: Footsie gains short-lived as US stocks slip from record highs on oil price retreat